Benchmarking to reduce costs and maximise efficiency is not new, but a more analytical breed of decision-maker is increasingly look-ing to introduce the concept into the fleet arena with the measuring of key performance indicators (KPIs).
Procurement managers now play a key role in fleet negotiations and, according to Jon Gilbert, director of customer service at ING Car Lease, they are very good at implementing performance metrics to encourage suppliers to justify their existence.
“We have won tenders on the basis of having benchmarking tools in place. We have had to up our game as suppliers and there has been a cultural change among customers,” he said.
But ACFO director Stewart Whyte, who is also managing director of consultancy Fleet Audits, says: “Only a handful of fleet operators have core performance and essential KPIs at their fingertips and managers can only benchmark if they know their own data.
“What benchmarking exists is mainly around fleet policy and service levels, but not fleet performance. How many fleet managers exactly know fuel consumption, level of uninsured losses, average tyre life etc? If they don’t know that information then they have no idea whether they are class-leading, average or worse.”
Yet, data from the accurate measurement of KPIs helps optimise fleet operations, modify driver behaviour and increase customer services levels.
Without a thorough understanding of fleet operations, managers under pressure to improve the bottom line usually have no other recourse, but to cut spending without quantifying or justifying their decision-making rationale.
In contrast, accurately measuring areas of operational performance enables fleet managers to make informed decisions that drive their business forward to maximise revenue while reducing operational costs.
Kenneth Porter, of supply chain consultancy Total Logistics, says benchmarking operational performance is crucial to improve efficiency and can deliver significant fin-
He says: “No two organisations are ever the same, so it’s unrealistic to measure just one aspect of the process, such as cost, against a competitor and expect a like-for-like comparison. This basic approach under utilises the benchmarking process and undervalues the significant improvements it can bring to productivity, asset utilisation and costs.
“What’s needed is a much more operational approach that is tailored to an individual organisation and uses more robust methods to obtain valid comparisons. This operational focus involves identifying key processes and assessing the effectiveness and productivity of each one based on relevant standards.
“By adopting a more sophisticated approach, more variables are taken into consideration and so data surrounding costs, performance and service are recorded and then compared against synthesised models.”
Porter adds: “If businesses want to stay ahead of the game, they need to ensure they are performing at maximum efficiency and at the very least are in-line with the market standard.
Benchmarking is an effective check on the current market and it is critical to ensure like-for-like comparisons are conducted.
“It isn’t something that should be taken lightly as it needs to be done correctly and monitored regularly to ensure that operational and financial flexibility is provided to adapt to business changes. Typically benchmarking identifies 10-15% total cost savings, but the company will only see a benefit if they ensure the cost savings are delivered.”
So what are the key performance indicators that fleet decision-makers should measure to cut costs and maximise efficiency? Below we highlight areas ripe for measurement, the implications of not measuring them and the benefits of having them under tight control.